Curmudgeon's Corner: RI's public employee pension follies continue

September 28, 2011

By RICHARD AUGUST
Special to the Standard

Last week General Treasurer Raimondoâs Pension Advisory Board met for the last time. As advertised, the 12-person board made no recommendations for fixing the existing pension mess.
The Friday before that, a coalition of eight public employee unions launched a ten-minute You Tube video and sent out a mailer to 30,000 Rhode Island households described as the opening of their fight to preserve the status quo.
As predicted in this column right after its members were named, the four union representatives on the board offered nothing to the panelâs deliberations. In a recent article in the stateâs daily newspaper, NEA teachersâ union boss Bob Walsh said they âhad never been askedâ.
âThe unions are waiting and watching to see what Raimondo recommends before trying to influence what finally emerges from the General Assembly.â he said. In a related announcement, Walsh noted the lack of leadership from Governor Chafee, whom the teachers thought they had in their pocket. My bet is that, true to form, Chafee will let Raimondo do the heavy lifting and merely show up at the press conference at which she announces her proposals.
Panel member and Council 94 honcho J. Michael Downey went even further, exclaiming outrage that Cranston Mayor Alan Fung would have the audacity to suggest the obvious fact that âhe has a list of people waitingâ to take the jobs of public employees who feel they are being given a raw deal.
As I have also stated previously, the unions should have had no place on the pension advisory board due to the adversarial nature of their deliberations. This is a battle between the taxpayers and the members of the public employee unions for the future of our state. And, please, spare us the line about how public employees are taxpayers, too. It is a non sequitur.
In a 39-page opinion which she described as a legal gray area, Superior Court Judge Sara Taft-Carter ruled on September 13th that public employees have a contractual right to their pension benefits. This decision no doubt is headed to the Supreme Court (which is the only court created by the state Constitution) for a final determination.
I think it was Abraham Lincoln who said a judge is a lawyer who knows a politician. Judge Taft-Carter can certainly be described as politically-connected. She can trace her family roots in this country back to Blackstone Valley Industrialist Robert Taft, Sr. who died in 1725. The Taft family, including her late father, the former mayor of Cranston James L. Taft, Jr., have served in elected or appointed office in many states since then.
Judge Taft-Carter was appointed by former Governor Donald Carcieri less than two years ago. Her background was in real estate zoning law and as assistant town solicitor for Narragansett and North Kingstown. She drew the pension case by being the civil calendar judge for Providence County which is a position rotated among the courtâs judges.
The unionsâ lawyer Lynette Labinger, hailed the ruling as a great victory stating that she will now âdrill down into the facts and dataâ to show that the state has other ways to solve its pension and other financial problems. If so, that raises the question why the four union representatives on Raimondoâs Pension Advisory Board offered no solutions to these problems.
To be fair, Taft-Carter was skeptical of some of the unionsâ claims. She offered a three-stage test to determine whether the changes to the pension system enacted in 2009 and 2010 âsubstantially impairedâ a contractual relationship.
The unions have staked their claim on the concept of âvestingâ, arguing that once an employee reaches ten years on the job they are entitled to the pension benefits described in law or contract. The open question is when the contract is formed. When the person is hired; when s/he is vested; or when s/he retires.
According to Barronâs Law Dictionary, âAn employeeâs pension rights are âvestedâ when he or she has completed the minimum term of employment necessary to receive retirement pay in the future. [They] are distinguished from âmaturedâ pension rights in that once a pension right has matured there is an unconditional right to immediate payment of retirement payments.â This language is enshrined in the 1974 ERISA Act. In other words, at ten years (or more) the 8.75% payroll contribution a public employee makes could be frozen plus, say, 4.5% interest and held in trust until s/he retires under the calculation of benefits called for under the contract existing when the funds were frozen. Going forward her or his 8.75% could be tax-deferred and directed into a 403(b) retirement savings plan managed by the general treasurerâs office.
For persons with less than ten years service as of a certain date, say December 31st, their payroll contribution could be paid out to them in a lump sum plus interest or rolled over tax-free into a self-directed IRA or the state 403(b) plan.
This approach should stifle the frequently-heard public employee complaint that âI have paid into the system all these years.â
Anyone who has the required years of service and has reached the stipulated retirement age would be entitled to her or his benefits as defined in the existing contract or law.
President Obama launched his reelection campaign at an unnecessary joint session of Congress called at his request so he could scold House Republicans and demand that his $487 billion âstimulus liteâ jobs bill be passed at once. He promised to tell us later how this bill was to be funded.
Obamaâs two favorite billionaires, Warren Buffet and Bill Gates, have said that they should pay more taxes. Sure enough, one of the Presidentâs proposals calls for a special âBuffet taxâ on billionaires. (Thatâs Warren, not Jimmy.)
I wonder why, if Mssrs. Buffet and Gates feel so strongly about paying more taxes, they donât just write a check to the Treasury for, say, $10 billion each and mark it to apply to Obamaâs jobs bill.
The best thing the Republicans could do would be to say, âMr. President, we donât agree with your approach to getting us out of this recession or creating jobs but you are the president so we will pass your bill. However, this is your plan and if unemployment remains high and the economy is barely growing, it is on you and you will have to answer to the American people in November 2012.â
By the way, the next time anyone sees our ultra-left Senators Reed and Whitehouse at a town meeting please ask them why the Democrat-dominated Senate has not passed a budget in over two years.
Richard August is a North Kingstown resident and a regular contributor to the Standard Times. His opinions are his own. He can be reached at richardjaugust@yahoo.com.